Budget 2025 gives the Canada Revenue Agency $77 million over four years, plus $19.2 million annually, to fund a new compliance program targeting personal services businesses and fees-for-service reporting.
A personal services business (PSB) is a corporation that effectively operates like an employee-for-hire, often with one main client and limited business risk—these structures are now firmly on CRA’s radar.
The same funding lifts the long-standing moratorium on T4A penalties in the trucking industry and supports broader enforcement against worker misclassification and underground “Driver Inc” arrangements.
Corporations that look like PSBs can face higher tax rates, denied small business deductions, restricted expense claims, and increased audit risk if CRA challenges their status.
Using tools like T4ASlip.com to properly report fees-for-service via T4A slips is one part of showing good faith compliance as CRA ramps up its focus on PSBs and contractor arrangements.
Personal Services Businesses and the CRA Crackdown in Budget 2025
If you operate through a one-person corporation, or you pay incorporated individuals to do work for your business, the term “personal services business” (PSB) should be on your radar.
In Canada, a personal services business is a company that, in the CRA’s eyes, looks a lot more like an employee-for-hire than a true independent business. For years, some people used PSB-style structures to pay less tax or avoid payroll obligations.
Budget 2025 makes it clear: that era is ending.
The federal government is giving the Canada Revenue Agency (CRA) new money and a clear mandate to crack down on non-compliance related to personal services businesses and fees-for-service reporting.
1. What did Budget 2025 actually say about personal services businesses?
Budget 2025 proposes to provide the CRA with approximately $77 million over four years, starting in 2026–27, with ongoing funding of about $19.2 million annually. This funding is specifically earmarked to:
• Implement a program that addresses non-compliance related to personal services businesses; and
• Lift the moratorium on penalties for failing to properly report fees for services, particularly in the trucking industry via T4A slips.
In plain language: Ottawa is paying CRA to look much more closely at situations where people are being paid “as if” they are independent businesses, but behave like employees, and where payers are not reporting those fees through the correct slips.
2. What is a personal services business (PSB)?
A personal services business is not about a specific industry—it’s about how the work relationship looks in reality.
Generally, a corporation may be considered a PSB if:
• It provides services that an employee would typically provide to a client;
• The incorporated individual would likely be considered an employee of the client if the corporation didn’t exist;
• The corporation often has a single or very small number of main clients; and
• The worker has limited real business risk or independence (for example, they use the client’s tools, follow the client’s schedule, and cannot send a replacement).
Think of it this way:
If you shut down the corporation and nothing about the day-to-day work changes except the name on the T4, CRA might see the corporation as a personal services business rather than a genuine independent company.
3. Why does CRA care so much about PSBs?
From CRA’s perspective, PSBs can be used to:
• Avoid or reduce payroll deductions like CPP and EI;
• Access tax benefits intended for genuine small businesses (such as the small business deduction);
• Shift income between corporate and personal tax in ways that reduce the overall tax bill.
Budget 2025 frames the new funding as part of a broader effort to:
• Crack down on employers that misclassify employees as contractors;
• Address underground and non-compliant practices (for example, in “Driver Inc” trucking arrangements);
• Restore fairness between businesses that follow the rules and those that do not.
4. How does this tie into T4A slips and fees-for-service reporting?
The same $77 million funding package that targets personal services business non-compliance also lifts the moratorium on penalties for failing to report fees for services via T4A slips in the trucking industry and supports enforcement around fees-for-service generally.
Why this matters:
• When a business pays a corporation or individual for services, those payments often need to be reported on a T4A slip (commonly using Box 048 – Fees for services).
• For years, penalties for not reporting certain fees-for-service in trucking were effectively on hold.
• Budget 2025 and subsequent CRA announcements now make it clear: that moratorium is ending, and penalties will once again apply.
If you pay incorporated contractors—including potential PSBs—and never issue T4A slips, you are exactly the type of case CRA’s new program is designed to examine.
5. What happens if CRA decides your corporation is a personal services business?
If your corporation is reclassified as a PSB, the tax consequences can be significant. While exact rules should be reviewed with a professional, common impacts include:
• Losing access to the small business deduction on that income;
• Paying higher effective corporate tax rates on PSB income;
• Strict limits on expense deductions (often restricted to salary paid to the incorporated individual and a few basic expenses);
• Possible reassessments for prior years, including interest and penalties.
For payers, heavy reliance on PSB-style contractors can also attract questions about worker misclassification, payroll obligations, and whether T4A reporting has been done correctly.
6. Who should be paying attention to this crackdown?
This isn’t just about trucking or one sector. The PSB crackdown can affect:
• Consultants who work almost exclusively for one client through a corporation;
• Incorporated professionals or specialists who function essentially like in-house staff;
• Businesses that have replaced employees with incorporated “contractors” who still work like employees;
• Industries with common “one-person company” arrangements—IT, consulting, creative services, logistics, and more.
If you are:
• An individual operating through a single-shareholder corporation, or
• A business paying many incorporated individuals as “contractors,”
you should assume CRA will be looking more closely at these relationships over the coming years.
7. Practical steps if you operate a personal services business
If you’re an individual working through a corporation that might look like a PSB, consider:
• Reviewing your situation with a CPA or tax advisor;
• Assessing whether your working relationships truly reflect independent business status (multiple clients, real risk, control over work);
• Keeping clear documentation of contracts, pricing, and how you operate;
• Planning for the possibility that CRA could view some income as PSB income and tax it accordingly.
Remember: this isn’t about panic. It’s about understanding your risk and making informed decisions before CRA’s new program ramps up.
8. Practical steps if you pay potential PSBs or incorporated contractors
If your organization pays incorporated individuals who work much like employees, you should:
• Map out who you are paying, how much, and for what type of work;
• Identify where you should be issuing T4A slips for fees-for-service;
• Review contracts and working arrangements with a tax or legal advisor to ensure workers are properly classified;
• Consider whether some contractors should be moved to payroll;
• Put a repeatable process in place for T4A issuance each year.
Proper T4A reporting does not “solve” all PSB issues on its own, but it is a key sign of good faith compliance if CRA reviews your contractor relationships.
9. Where T4ASlip.com fits in
At T4ASlip, we built our platform for exactly this world—where fees-for-service reporting can no longer be an afterthought.
If you’re paying contractors, potential PSBs, or incorporated service providers, T4ASlip.com can help you:
• Import payment data from spreadsheets or accounting software;
• Automatically flag recipients who hit reporting thresholds;
• Generate T4A slips in bulk, with consistent data;
• Create CRA-ready electronic files for easy submission;
• Maintain audit-ready records that show you’ve taken reporting obligations seriously.
With Budget 2025 funding a dedicated CRA program aimed at personal services businesses and fees-for-service, relying on scattered spreadsheets and memory is more risky than ever.
T4ASlip – Compliance Made Simple
Whether you’re an incorporated individual worried about PSB rules, or a business paying contractors and service companies, now is the time to get your reporting and documentation in order.
T4ASlip – Compliance Made Simple for every T4A you need to file before CRA comes knocking.